What is an institutional investors role once a securities class action has been settled?
If an institutional investor has a large loss in a case and has elected to take no active role, that is, remain a class member in an action initiated by others, it is important that it evaluate the fairness of the settlement and the plan of allocation. Even if the settlement value is large, the fund’s actual recovery can be a small portion of its losses because of the huge size of the class. The following options are typically available to clients at the time of settlement: File an objection to the settlement and/or plan of allocation. In some cases, the Plan of Allocation in a given settlement may not adequately compensate certain class members, even though their claims may be stronger than those of other class members. A classic example of this is a case involving claims arising under Section 10b of the Securities Exchange Act of 1934 and Section 11 of the Securities Act of 1933. Since Section 11 claims do not require proof of scienter, they are stronger claims and should be treated
